Question

The following information is from Samsung (Samsung.com or its financial statements in Appendix A), which is a leading manufacturer of consumer electronic products.

W in millions Current Year Prior Year

Cash . . . . . . . . . . . . . . . . . . . . . . . . W 22,636,744 W 16,840,766

Accounts receivable . . . . . . . . . . . . 28,520,689 28,234,485

Current assets . . . . . . . . . . . . . . . . . 124,814,725 115,146,026

Total assets . . . . . . . . . . . . . . . . . . . 242,179,521 230,422,958

Current liabilities . . . . . . . . . . . . . . . 50,502,909 52,013,913

Shareholders’ equity . . . . . . . . . . . 179,059,805 168,088,188

Net sales . . . . . . . . . . . . . . . . . . . . . 200,653,482 206,205,987

Required

3. Compute the days’ sales uncollected (rounded to one decimal) at the end of both the current year and the prior year. Has the collection of receivables improved? Explain.

Short answer

Answer

The current year's Days' Sales Uncollected is 51.88 days, whereasthe prior year's Days' Sales Uncollected is 49.98 days.

Step-by-step solution

Step-by-Step SolutionStep 1: Meaning of Days’ Sales Uncollected

This ratio is used to determine the days before the entity will collect the receivables

Computation of current year’s Days' Sales Uncollected

$$\begin{gathered} Day\text{'}ssalesuncollected=\frac{AccountsReceivables}{Netsales}\times 365 \\ =\frac{28,520,689}{200,653,482}\times 365 \\ =51.88days \end{gathered}$$

Computation of prior year’s Days' Sales Uncollected

$$\begin{gathered} Day\text{'}ssalesuncollected=\frac{AccountsReceivables}{Netsales}\times 365 \\ =\frac{28,234,485}{206,205,987}\times 365 \\ =49.98days \end{gathered}$$

Explanation-

The number of days uncollected has increased from the prior year to the current year. Samsung is not collecting its receivables as efficiently in the current year compared to its prior year.